How it Helps
Determining the Cost:
To implement a carbon tax, the government must first determine the true societal cost of each ton of carbon emissions. This requires input from many organizations and experts to determine how high to tax businesses in order to see a stark decline in greenhouse gas emissions. A 2018 report by the Organisation for Economic Co-operation and Development (OECD) showed that many countries’ carbon prices are not high enough to make a significant difference in controlling climate change.3
A carbon tax has the potential to anger individuals and businesses who do not want to pay a tax for burning fossil fuels or switch to alternative forms of energy. This could lead to an outsourcing of production to other states or countries without a stringent carbon tax, resulting in the loss of jobs and incomes.4 Therefore, a carbon tax should be implemented gradually, and there should be mechanisms in place to ensure that the benefits of switching to cleaner forms of energy outweighs benefits of continuing to burn fossil fuels.
1) Canada’s Carbon Pollution Pricing
Every province and territory in Canada has had a form of carbon pollution pricing system since 2019. Although these systems are flexible and can vary among jurisdictions, the federal government has its own federal pricing system and has set minimum stringency standards. The federal system consists of a regulatory fuel charge on fossil fuels as well as a performance-based system for industries. Proceeds from the carbon pricing system remain in the jurisdiction where they are collected and can be used to help their residents, economy, and environment. This allows carbon pricing to remain affordable and for investments to be made in energy efficiency and climate action solutions.
2) California’s Cap-and-Trade Program
California’s 2013 cap-and-trade program on greenhouse gas emissions covers electric power plants, industrial plants, and fuel distributors. This program covers about 85% of the state’s emissions, and its revenues are appropriated to state agencies to implement programs that further reduce emissions.